News

2012: Record Year for Land O'Lakes

27 March 2013

US - Land O'Lakes has reported strong performance in 2012. Its Crop Inputs, Feed and Layers segments achieved record sales.

The year 2012 was highlighted by several records for Land O'Lakes including
overall corporate sales and earnings plus record performance by several of
our business units, according to Pete Kappelman (Chairman of the Board) and Christopher J. Policinski (President and Chief Executive Officer) in the company's annual report for 2012. In addition, it returned $113 million back to members,
the fourth consecutive year in which member returns exceeded $100 million.

The strong results in 2012 continue a trend of exceptional performance.
The past six years (2007-2012) represent the top six years for net sales
and earnings in company history. During this same time, they have returned
over half a billion dollars to members.

This consistent, positive performance is a direct result of the continuing implementation of
strategies designed to build our value-added, branded businesses in Dairy Foods, Feed and
Crop Inputs. These are strong, growing segments of agribusiness. Intensifying Land O'Lakes'
growth in these segments is the current focus.

The company's ambitious growth strategy is fuelled by increasing investments in several key areas:
acquisitions that leverage our existing infrastructure and expertise; product innovations; and
building industry-leading brands. This requires a financial strategy that balances short-
term earnings and returns with long-term investment to achieve even greater future rewards.
In 2012, capital investments totaled $597 million.

Financial review

Land O'Lakes achieved record sales of $14.1 billion in 2012 plus record net earnings of
$241 million. In addition, three of our business segments - Crop Inputs, Feed and Layers -
achieved record sales while Crop Inputs also had record earnings.

A variety of factors influenced performance in 2012 including warmer than normal
weather, volatile markets and fluctuations in commodity pricing. Overall, Land O'Lakes'
results were positively impacted by the continuing implementation of strategies focused on
consolidating and strengthening our business platform, reducing costs and driving growth.

Business Review

The following summary provides financial results in two formats:

With unrealized hedging gains and losses that is consistent with accounting conventions

Without the unrealized hedging gains and losses, which is a more performance-based indicator that is also used to determine payments back to cooperative members in the form of patronage.

Dairy Foods

Dairy Foods achieved strong results in 2012 despite significant challenges in the first half of the year caused by unexpected and exceptional growth in milk supplies and volatile markets. Pre-tax earnings for the year totalled $38 million, a 34 per cent increase from 2011, while net sales were $4.2 billion, four per cent less than the previous year. Pre-tax earnings without unrealised
hedging were $39 million.

Within the Dairy Foods portfolio, Retail Foods recorded exceptional performance including a number of new records. Record volumes were achieved by Superspreads, which include the Land O'Lakes® tub butter products. Continuing innovation added to product offerings including Butter With Olive Oil and Sea Salt and Unsalted Butter in half-sticks, a Land O'Lakes exclusive. Retail Cheese also had a strong year where Land O'Lakes Deli Cheese products were expanded into several of the nation's largest retail chains and innovation continued with the launch of a new 4 Cheese Italian Blend.

The Land O'Lakes strategy of growth also reshaped the portfolio mix of Dairy Foods in 2012. New growth initiatives included the launch of Sauté ExpressTM Sauté Starter, an on-trend, highly convenient product that extends the relevance of the Land O'Lakes brand to a new generation of users. Another significant growth development was the launch of KoruTM Creamery Style Yoghurt, a new premium craft yoghurt that is targeted at the highly valued younger consumer.

Dairy Foods also grew through significant new acquisitions in 2012. This included the acquisition of Kozy Shack Enterprises, Inc., adding this leading brand of refrigerated desserts to its product offerings. Dairy Foods also benefited from its 50 per cent ownership in Eggland's Best, LLC, a newly formed joint venture with Eggland's Best, Inc. Eggland's Best, LLC provides new outlets for the Land O'Lakes
brand in the high growth category of specialty eggs.

Strong results were also achieved in the Business-to-Business segment of Dairy Foods, specifically Foodservice, which provides products to schools, government organisations and other commercial food operations. Results for Industrial Foods were negatively impacted by the Global Dairy Ingredients division, which incurred losses caused by growth of milk supplies in the first half of the year plus commodity market and product mix impacts on the cheese and whey business. Despite these adverse market conditions, the Global Dairy Ingredients division continued to expand its relationships with large, global customers.

Crop Inputs

Crop Inputs, which is operated through the wholly owned Winfield Solutions subsidiary, delivered record results in 2012 bolstered by a powerful new branding strategy, continuing innovation and warmer than normal weather conditions that drove demand for our industry-
leading products and services to new highs. Pre-tax earnings for the year were $228 million, 62 per cent more than 2011. Net sales for 2012 totalled $4.7 billion, 18 per cent higher than last year. Pre-tax earnings without unrealised hedging were $223 million.

Each of the major businesses within Crop Inputs delivered strong results, with Crop Protection Products volumes leading the way with a 22 per cent increase from last year. Seed sales were up 19 per cent. Major factors driving this performance included the exceptionally warm spring season that enabled early planting and more chemical applications plus an overall increase in planted acres.

Major brand building advances in 2012 included uniting the company's extensive line-up of products and services under the WinField brand, providing an integrated, customer-facing brand platform. This initiative was launched with a national media campaign including television
and print advertising, public relations and online brand awareness strategies.

WinField also continued to build its leadership position in technology and innovation. The acclaimed R7®
Tool continued to expand with over 300 accounts enrolled and 2,500 sellers trained to leverage Answer Plot®
data in a Global Information System framework. In recognition of its achievements, WinField earned the 2012 Agriculture Technologies Award from the Agricultural Retailers Association.

WinField also grew through acquisitions. This included the acquisition of Precision Turf & Chemical, Inc., the latest expansion of the company's Professional Products Group, which is rapidly growing by marketing WinField products and services to such specialty customers as golf courses, recreational facilities and sports venues.

Feed

The company's Feed segment is operated through our wholly owned subsidiary, Purina Animal Nutrition, which delivered exceptional performance in 2012. Results were driven by strong margins throughout its portfolio plus the launch of a major new branding platform, new product lines and a key acquisition. Pr-tax earnings for the year totalled $31 million, 63 per cent favourable to 2011 while net sales were $4.6 billion, 15 per cent more than last year. Pre-tax earnings without unrealized hedging were $26 million.

Purina achieved significant margin improvement gains in the Lifestyle and Livestock businesses
through improved product mix, focused pricing actions and successful risk management.
The 2012 results were also favorably influenced by strong protein margins in the ingredients
business and by the successful acquisition of Old Mill Troy in the premix business.

A major brand-building initiative in 2012 moved toward unifying our feed products under the
Purina name. This strategy was designed to foster growth by leveraging the power of the iconic
Purina brand, focusing product identity and maximizing brand marketing power to drive sales.

This brand strategy came to life with the launch of a new Purina® small animal product line,
expanding the power of the Purina brand into the $500 million small pet market. Additional
product innovations included the introduction of several new horse products including
high-margin supplements and Hydration HayTM Block. Livestock and cattle innovations
included HeiferSmart® and STORM® Cattle Mineral, an industry-leading weatherised cattle
mineral product.

Layers

The Layers segment, conducted through Moark, LLC, experienced a challenging year with
unfavourable results driven primarily by high feed costs and lower commodity and brown egg
pricing. Losses for the Layers segment totalled $34 million in 2012 compared with a loss of
$3 million in 2011. Net sales achieved a new record of $735 million, 23 per cent more than
2011. Losses without unrealised hedging were $32 million.

A confluence of significant industry-wide challenges combined to produce the losses in
Layers in 2012. These included lower than average commodity pricing, lower brown egg
pricing due to excess supply in the market, and excess production of small and medium eggs
as a result of younger flocks and hot weather during the summer. The traditionally strong
Easter season also experienced poor demand for eggs in 2012. The earnings challenges in
Layers were addressed through a sharpened focus on lowering production and processing
costs through implementation of cost savings and margin enhancement initiatives. Despite the
industry-wide headwinds, Moark continued to pursue sales growth and achieved significant
success with product introduction into one of the nation's largest retailers.

Investing to Support Members

With record sales and earnings in 2012, Land O'Lakes is continuing to deliver increasingly
strong results for the benefit of our members. These benefits include current returns in the
form of patronage plus investments to accelerate our future growth.

The company is also investing in our members' success by providing a variety of additional services.
These include our Business Development Services division, which provides consulting, human
resource support, and learning and development to foster the growth of member cooperatives
and improve their bottom line. Our public affairs and government relations initiatives provide
members with a collective, powerful voice with law-makers and policy-makers on key industry
issues. Last year, Land O'Lakes organized Congressional visits and advocacy meetings in
Washington, DC for over 200 members and leaders of our organization. Active engagement
with industry groups, such as the National Milk Producers Federation and National Council of
Farmer Cooperatives, also amplify the Land O'Lakes voice on vital member issues

.

Building Momentum for Future Growth

Powered by strong performance in 2012, Land O'Lakes is well positioned for future growth.
The global opportunities of agribusiness are unprecedented, with the demand for food
expected to grow by 70 per cent as the world population grows to nine billion by 2050. As
Land O'Lakes continues 'Building Momentum', it intends to fully capture this opportunity.